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U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000.
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[ ] TRANSITION REPORT PURSUANT SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______________ to ________________.
Commission file number 000-25295
FIRSTIER CORPORATION
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(Exact name of small business issuer as specified in its charter)
Colorado 47-0484682
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
11210 Huron, Northglenn, CO 80234
---------------------------------
(Address of principal executive offices, including zip code)
(303) 451-1010
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(Issuer's telephone number)
-----------------------------------------------------------------
(Former name, former address and former fiscal year, if
changed since last report.)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days. Yes X No
--- ---
As of November 13, 2000, there were 7,718,069 shares of the registrant's
common stock outstanding.
Transitional Small Business Disclosure Format (check one): Yes No X
--- ---
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FIRSTIER CORPORATION
TABLE OF CONTENTS
PAGE NO.
PART I FINANCIAL INFORMATION
Item 1. Financial Statements 2
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 12
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FIRSTIER CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30, 2000 (Unaudited) and December 31, 1999
(In thousands, except share data)
September 30, 2000 December 31, 1999
------------------ -----------------
(Unaudited)
ASSETS
Cash and due from banks ...................................................... $ 19,910 $ 26,689
Interest bearing deposits in other banks ..................................... 229 363
Federal funds sold ........................................................... 76,995 --
Investment securities:
Available-for-sale, at fair value .......................................... 39,969 36,369
Held-to-maturity, at amortized cost, fair value of $4,052, at September
30, 2000 (unaudited) and $6,006, at December 31, 1999 ................... 4,254 5,989
------------ ------------
Total investment securities ......................................... 44,223 42,358
------------ ------------
Loans held for sale .......................................................... 5,478 1,123
Gross loans receivable: ...................................................... 773,113 623,070
Less: unearned loan fees ................................................... (2,295) (2,121)
allowance for loan losses ............................................ (8,239) (5,322)
------------ ------------
Net loans receivable ................................................ 762,579 615,627
------------ ------------
Premises and equipment, net .................................................. 11,549 11,117
Preferred securities issuance cost, net ...................................... 1,068 1,083
Other assets ................................................................. 11,497 8,461
------------ ------------
TOTAL ASSETS ........................................................ $ 933,528 $ 706,821
============ ============
LIABILITIES
Deposits:
Demand non-interest bearing ................................................ $ 78,891 $ 58,648
Demand interest bearing .................................................... 27,450 19,951
Time ....................................................................... 722,354 523,395
------------ ------------
Total deposits ...................................................... 828,695 601,994
Federal funds purchased and securities sold under agreements to repurchase ... 7,802 32,860
Note payable ................................................................. 24,501 11,560
Federal Home Loan Bank borrowings ............................................ 8,478 8,525
Other liabilities ............................................................ 5,542 3,178
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Total liabilities ................................................... 875,018 658,117
------------ ------------
Company obligated mandatorily redeemable preferred securities of subsidiary
trust holding solely Junior Subordinated Debentures ........................ 23,000 23,000
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STOCKHOLDERS' EQUITY
Preferred stock, 20,000,000 shares authorized; no shares issued and
outstanding at December 31, 1999 and September 30, 2000 (unaudited) ...... -- --
Common stock, 50,000,000 shares authorized; shares issued and outstanding:
7,579,667 at December 31, 1999 and September 30, 2000 7,718,064
(unaudited) .............................................................. 3,665 1,520
Retained earnings ............................................................ 31,916 24,520
Accumulated other comprehensive income (loss) ................................ (71) (336)
------------ ------------
Total stockholders' equity .......................................... 35,510 25,704
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY .......................... $ 933,528 $ 706,821
============ ============
(See the accompanying footnotes)
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FIRSTIER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Three months ended September 30, 2000 and 1999 (Unaudited) and nine months
ended September 30, 2000 and 1999 (Unaudited)
(In thousands, except share data)
Three months ended September 30, Nine months ended September 30,
2000 1999 2000 1999
------------- ------------- ------------ -------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Interest income:
Loans, including fees .................................. $ 20,692 $ 12,178 $ 59,919 $ 29,820
Taxable investment securities .......................... 579 531 1,566 1,340
Nontaxable investment securities ....................... 130 128 380 390
Dividends on investment securities ..................... 43 11 125 36
Federal funds sold ..................................... 873 132 1,280 546
------------ ------------ ------------ ------------
Total interest income ........................... 22,317 12,980 60,270 32,132
------------ ------------ ------------ ------------
Interest expense:
Deposits ............................................... 11,034 5,770 27,721 14,265
Federal funds purchased ................................ 2 36 170 60
Securities sold under agreements to repurchase ......... 86 56 228 157
Note payable ........................................... 537 66 1,250 150
Trust preferred securities ............................. 539 545 1,617 1,360
Federal Home Loan Bank borrowings ...................... 143 138 1,374 392
------------ ------------ ------------ ------------
Total interest expense .......................... 12,341 6,611 32,360 16,384
------------ ------------ ------------ ------------
Net interest income ............................. 9,976 6,369 27,910 15,748
Provision for loan losses ................................ 499 745 3,429 2,174
------------ ------------ ------------ ------------
Net interest income after provision for loan losses ...... 9,477 5,624 24,481 13,574
------------ ------------ ------------ ------------
Non-interest income:
Fees for other customer services ....................... 788 559 2,164 1,431
Net gains from sale of loans ........................... 337 78 738 672
Commissions and fees from brokerage activities ......... 107 67 343 248
Investment securities transactions, net ................ -- -- -- --
Other operating income ................................. 222 150 1,688 402
------------ ------------ ------------ ------------
Total non-interest income ....................... 1,454 854 4,933 2,753
------------ ------------ ------------ ------------
Non-interest expenses:
Salaries and employee benefits ......................... 3,529 2,175 9,704 5,851
Net occupancy expense of premises ...................... 929 590 2,703 1,620
Purchased services ..................................... 571 569 1,470 1,324
Office supplies ........................................ 136 118 477 347
Other operating expenses ............................... 1,216 661 3,492 1,910
------------ ------------ ------------ ------------
Total non-interest expenses ..................... 6,381 4,113 17,846 11,052
------------ ------------ ------------ ------------
Income before income taxes ...................... 4,550 2,365 11,568 5,275
Income tax expense ....................................... 1,653 868 4,172 1,825
------------ ------------ ------------ ------------
NET INCOME ............................................... $ 2,897 $ 1,497 $ 7,396 $ 3,450
============ ============ ============ ============
Other comprehensive income:
Unrealized holding gains (losses) arising during
the period .......................................... 509 (198) 4 (819)
Unrealized holding gains (losses) arising during
prior periods, realized during current period........ -- 1 -- 45
Income tax (expense) benefit related to items of
other comprehensive income .......................... (188) 67 (150) 263
------------ ------------ ------------ ------------
Other comprehensive income, net of tax .......... 321 (130) 256 (511)
------------ ------------ ------------ ------------
COMPREHENSIVE INCOME ..................................... $ 3,218 $ 1,367 $ 7,652 $ 2,939
============ ============ ============ ============
Income per share:
Basic and diluted earnings per share ..................... $ 0.38 $ 0.20 $ 0.97 $ 0.46
============ ============ ============ ============
Weighted average shares outstanding .................. 7,718,069 7,579,667 7,626,643 7,527,891
============ ============ ============ ============
(See the accompanying footnotes)
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FIRSTIER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine months ended September 30, 2000 and 1999 (Unaudited)
(In thousands)
Nine months ended September 30,
-------------------------------
2000 1999
------------ ------------
(Unaudited) (Unaudited)
Cash flows from operating activities:
Net income .............................................................. $ 7,396 $ 3,450
Adjustments to reconcile net income to cash provided by operating
activities:
Provision for loan losses .......................................... 3,429 2,174
Depreciation and amortization ...................................... 1,064 873
Net gains from sale of loans ....................................... (738) (672)
Proceeds from sale of loans held for sale .......................... 34,147 44,190
Origination of loans held for sale ................................. (37,763) (41,273)
Investment securities transactions, net ............................ -- --
Changes in deferrals and accruals:
Other assets ....................................................... (3,564) (902)
Other liabilities .................................................. 2,206 (1,792)
------------ ------------
Net cash provided by operating activities ........................ 6,177 6,048
------------ ------------
Cash flows from investing activities:
Net (increase) decrease in federal funds sold ........................ (76,995) 10,770
Net (increase) decrease in interest bearing deposits in other banks .. 134 3
Purchase of investment securities available-for-sale ................. (14,954) (71,081)
Purchase of investment securities held-to-maturity ................... -- (127)
Proceeds from maturities/paydowns of investment securities ........... 13,500 39,127
Net increase in loans ................................................ (149,869) (205,854)
Expenditures for bank premises and equipment ......................... (1,534) (2,950)
Proceeds from sale of real estate owned .............................. -- 162
------------ ------------
Net cash used in investing activities ............................ (229,718) (229,950)
------------ ------------
Cash flows from financing activities:
Net increase in deposits ............................................. 226,701 196,986
Net increase (decrease) in securities sold under agreements to
repurchase ......................................................... 2,154 15,188
Advances from Federal Home Loan Bank ................................. (27,165) (57)
Proceeds from note payable ........................................... 12,941 11,750
Payments on note payable ............................................. -- (8,790)
Proceeds from trust preferred securities ............................. -- 23,000
Proceeds from sale of common stock ................................... 2,145 --
Debt issuance cost ................................................... (14) (1,092)
------------ ------------
Net cash provided by financing activities ........................ 216,762 236,985
------------ ------------
Net increase in cash and due from banks ................................... (6,779) 13,083
Cash and due from banks at beginning of period ............................ 26,689 13,892
------------ ------------
Cash and due from banks at end of period .................................. $ 19,910 $ 26,975
============ ============
(See the accompanying footnotes)
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FIRSTIER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three month and nine month periods ending September 30, 2000 and 1999
(Unaudited)
1. Summary of significant accounting policies
The accompanying unaudited interim financial statements have been prepared
in accordance with the instructions for Form 10-QSB and do not include all
of the information and footnotes required by generally accepted accounting
principles for complete financial statements. All adjustments that are, in
the opinion of management, of a normal recurring nature necessary for a
fair statement of results for the interim periods presented have been made.
The results of operations for such interim periods are not necessarily
indicative of results of operations for a full year. The statements should
be read in conjunction with the summary of significant accounting policies
and notes to consolidated financial statements of the Company included in
the Company's Annual Report on Form 10-KSB for the Year Ended December 31,
1999.
In the opinion of management, the accompanying consolidated financial
statements contain all adjustments necessary to present fairly the
financial position of the Company at September 30, 2000 and December 31,
1999, and the results of operations and cash flows for the three month and
nine month periods ended September 30, 2000 and 1999.
The consolidated financial statements include the accounts of the Company's
respective subsidiaries. All material intercompany transactions have been
eliminated in consolidation.
2. Nature of Operations
FirsTier Corporation (the "Company" or "FirsTier"), a multibank holding
company, offers full service community banking through 16 banking locations
in metropolitan Denver and northern Colorado, and two banking locations in
western and central Nebraska. FirsTier's Colorado bank opened nine new
branches during 1999 and one new branch in 2000.
3. Accounting Standard Implemented in 2000
In June 1998, the Financial Accounting Standards Board issued Statement No.
133, "Accounting for Derivative Instruments and Hedging Activities", which
establishes accounting and reporting standards for derivative instruments
and hedging activities. Under Statement 133, derivatives are recognized on
the balance sheet at fair value as an asset or liability. Changes in the
fair value of derivatives is reported as a component of other comprehensive
income or recognized as earnings through the income statement depending on
the nature of the instrument. Statement 137 was issued in June 1999, and
deferred the effectiveness of Statement 133 to all quarters of fiscal years
beginning after June 15, 2000, with earlier adoption permitted. The Company
has not yet adopted Statement 133, but it is not expected to have a
material impact on the consolidated financial statements.
4. 1999 Stock Incentive Plan
In September 1999 the Company adopted the 1999 Stock Incentive Plan to
provide incentives for eligible persons, including employees, non-employee
directors and consultants to the Company and its subsidiaries. The number
of shares of common stock of the Company to be issued under this plan may
not exceed 1,700,000. The plan is administered by the Company's Board of
Directors, and it determines the participants in the plan and the types of
awards to be granted and the terms and conditions of all awards. An option
for 500,000 shares has been granted under this plan to an executive officer
at an exercise price of $12.00 per share.
5. Corporate Restructuring
On September 14, 1999, the Company changed its state of incorporation to
Colorado and changed its name to FirsTier Corporation from First Western
Corp. As a result of the re-incorporation, the Company's common stock and
surplus accounts were combined. Also, the Company effected a 52.47623 for
one common stock split. All share and per share amounts contained in these
financial statements have been restated for this reorganization.
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6. Acquisition
In March 1999, the Company issued 232,994 shares of common stock to five
persons, including Joel H. Weins, Timothy D. Weins and two of his children,
and Michael J. Nelson in exchange for shares they owned in the Company's
Nebraska bank, representing an 8.6% minority interest in that bank. The
parties used a valuation based solely on book value of the two entities in
determining the exchange ratio for the transaction. Accordingly, no
goodwill was recognized by the Company in the transaction. The book value
of the minority interest was $683,000. After the exchange, the Company's
Nebraska bank became wholly-owned.
7. Offering of Trust Preferred Securities by FW Capital I
On February 16, 1999, the Company and its wholly owned subsidiary FW
Capital I (the "Trust"), completed the sale of $23.0 million of 9.375%
Cumulative Trust Preferred Securities of the Trust. Net proceeds were
approximately $21.9 million after payment of sales commissions and other
offering costs, and were invested in Junior Subordinated Debentures
maturing February 16, 2029, issued by the Company to the Trust in
connection with the public offering.
Interest on the Junior Subordinated Debentures is paid by the Company to
the Trust. This interest is the sole revenue of the Trust and the source
for distributions by the Trust to the holders of the Trust Preferred
Securities.
For financial reporting purposes, the Trust is treated as a subsidiary of
the Company, and accordingly, the accounts of the Trust are included in the
consolidated financial statements of the Company. The Trust Preferred
Securities are presented as a separate line item in the consolidated
balance sheet under the caption "Company obligated mandatorily redeemable
preferred securities of subsidiary trust holding solely Junior Subordinated
Debentures." For financial reporting purposes, the Company records
distributions payable on the Trust Preferred Securities as interest expense
in the consolidated statements of income.
The Junior Subordinated Debentures are unsecured and rank junior and are
subordinate to all senior debt of the Company and constitute a full and
unconditional guarantee on a subordinated basis by the Company of the
obligations of the Trust under the Preferred Securities.
8. Merger with Compass Bancshares, Inc.
On September 5, 2000, the Company and Compass Bancshares, Inc. ("Compass")
announced the signing of a definitive agreement, dated as of August 23,
2000, pursuant to which Compass would acquire the Company through a merger
whereby the Company will be merged into a wholly owned subsidiary of
Compass. The consideration to be paid to shareholders of FirsTier will
consist of 6,800,000 shares of Compass common stock. The merger is subject
to approval by the holders of the Company's outstanding common stock at its
Special Meeting of Shareholders to be held on December 13, 2000, and
appropriate banking regulators.
Upon the effectiveness of the merger, holders of Company common stock will
become owners of Compass common stock. Following consummation of the
merger, Compass intends to merge the Company's bank subsidiaries into
Compass Bank.
Compass is a Delaware corporation and financial holding company registered
with the Board of Governors of the Federal Reserve System under the Bank
Holding Company Act.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The following discussion should be read in conjunction with the Consolidated
Financial Statements and related notes. FirsTier's future operating results may
be affected by various trends and factors, which are beyond FirsTier's control.
These include the factors set forth in "Risk Factors" and "Cautionary
Statements" included in the registration statement of the Company declared
effective on February 10, 1999 SEC File Nos. 333-67197 and 333-67197-01.
Accordingly, past results and trends may not be reliable indicators of future
results or trends. With the exception of historical information, the matters
discussed below include forward-looking statements that involve risks and
uncertainties. FirsTier cautions readers that a number of important factors
could affect FirsTier's actual results and cause actual results to differ
materially from those in the forward-looking statements.
RESULTS OF OPERATIONS
Net interest income for the Company increased $3.6 million (56%) from $6.4
million for the three month period ended September 30, 1999, to $10 million for
the three month period ended September 30, 2000 and $12.2 million (78%) from
$15.7 million for the nine month period ended September 30, 1999 to $27.9
million ended for nine month period ended September 30, 2000. The major
components of this increase were:
1. Interest income increased $9.3 million (72%) from $13.0 million for
the three month period ended September 30, 1999 to $22.3 million for
the three month period ended September 30, 2000 and increased $28.1
million (88%) from $32.1 million for the nine month period ended
September 30, 1999 to $60.3 million for the nine month period ended
September 30, 2000. This increase is a result of average earning
assets increasing $340.1 million (65%) from $519.8 million for the
three month period ended September 30, 1999 to $859.9 million for the
three month period ended September 30, 2000 and increasing $328
million (72%) from $454.7 million for the nine month period ended
September 30, 1999 to $782.7 million for the nine month period ended
September 30, 2000. Most of the Company's earning assets (86% at
September 30, 2000) are loans, a large portion of which have floating
rates and are tied to the prime rate.
2. Interest expense increased $5.7 million (86%) from $6.6 million for
the three month period ended September 30, 1999 to $12.3 million for
the three month period ended September 30 ,2000 and increased $16
million (98%) from $16.4 million for the nine month period ended
September 30, 1999 to $32.4 million for the nine month period ended
September 30, 2000. Approximately $5.3 million of this increase is a
result of average interest bearing liabilities increasing $298.7
million (66%) from $451.1 million for the three month period ended
September 30, 1999 to $749.8 million for the three month period ended
September 30, 2000, and increasing $387.1 million (97%) from $399.1
million for the nine month period ended September 30, 1999 to $786.2
million for the nine month period ended September 30, 2000.
3. Net interest margin decreased 0.27% (6% change) from 4.90% for the
three month period ended September 30, 1999 to 4.63% for the three
month period ended September 30, 2000 and increased 0.16% (3% change)
from 4.62% for the nine month period ended September 30, 1999 to 4.78%
for the three month period ended September 30, 2000. The sources of
these changes are:
a) Yields on earning assets increased 0.39% (4% change) from 9.99%
for the three month period ended September 30, 1999 to 10.38% for
the three month period ended September 30, 2000 and increased
0.85% (9% change) from 9.42% for the nine month period ended
September 30, 1999 to 10.27% for the nine month period ended
September 30, 2000. This reflects the impact of an average 1.00%
increase in the prime lending rate on the Company's variable rate
loans.
b) Costs of interest bearing liabilities decreased 0.11% (2% change)
from 5.86% for the three month period ended September 30, 1999 to
5.75% for the three month period ended September 30, 2000, and
increased 0.02% (0.2% change) from 5.47% for the nine month
period ended September 30, 1999 to 5.49% for the nine month
period ended September 30, 2000. This is the result of an
increase in rates paid for fixed rate time deposits, an average
increase of 0.62% from 5.66% in 1999 to 6.28% in 2000, as well as
the impact of $23.0 million of trust preferred securities at
9.375% included in the liability mix.
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Provision for loan losses decreased by $0.3 million (38%) from $0.8 million for
the three month period ended September 30, 1999 to $0.5 million for the three
month period ended September 30, 2000 and increased by $1.2 million (55%) from
$2.2 million for the nine month period ended September 30, 1999 to $3.4 million
for the nine month period ended September 30, 2000. In response to a sustained
significant growth rate in the Company's loan portfolio, management reviewed and
revised the methodology for estimating the adequacy of the allowance for loan
losses in the fourth quarter of 1998. The methodology was further revised in the
first quarter of 1999 which resulted in special loan provisions.
Non-interest income increased $0.6 million (67%) from $0.9 million for the three
month period ended September 30, 1999 to $1.5 million for the three month period
ended September 30, 2000 and increased $2.1 million (75%) from $2.8 for the nine
month period ended September 30, 1999 to $4.9 million for the nine month period
ended September 30, 2000. The two major components of the increase were:
1. Fees for other customer services increased $0.2 million (33%) from
$0.6 million for the three month period ended September 30, 1999 to
$0.8 million for the three month period ended September 30, 2000, and
increased $0.8 million (57%) from $1.4 million for the nine month
period ended September 30, 1999 to $2.2 million for the nine month
period ended September 30, 2000 due to more branches or same branch
growth.
2. The Company sold a branch location in Loveland, Colorado and
recognized $1.1 million gain on the sale. This one-time gain is
included in the second quarter non-interest income under Other
Operating Income.
Non-interest expense increased $2.2 million (54%) from $4.1 million for the
three month period ended September 30, 1999, to $6.3 million for the three month
period ended September 30, 2000, and increased $6.7 million (60%) from $11.1
million for the nine month period ended September 30, 1999, to $17.8 million for
the nine month period ended September 30, 2000. The major components of the
increase were:
1. Salaries and employee benefits increased $1.3 million (59%) from $2.2
million for the three month period ended September 30, 1999 to $3.5
million for the three month period ended September 30, 2000, and
increased $3.8 million (64%) from $5.9 million for the nine month
period ended September 30, 1999 to $9.7 million for the nine month
period ended September 30, 2000. The increase is the result of
staffing four additional branch locations and a loan production
office.
2. Net occupancy expense of premises increased $0.3 million (51%) from
$0.6 million for the three month period ended September 30, 1999 to
$0.9 million for the three month period ended September 30, 2000, and
increased $1.1 million (69%) from $1.6 million for the nine month
period ended September 30, 1999 to $2.7 million for the nine month
period ended September 30, 2000. The increase represents the cost of
adding five additional banking facilities during 1999.
3. Other non-interest expenses increased $0.6 million (71%) from $0.7
million for the three month period ended September 30, 1999 to $1.2
million for the three month period ended September 30, 2000, and
increased $1.6 million (84%) from $1.9 million for the nine month
period ended September 30, 1999 to $3.5 million for the nine month
period ended September 30, 2000. This increase resulted from
additional expenses relating to telephone, marketing, and FDIC
insurance, and was attributable to the increase in banking facilities.
Net income increased $1.4 million (93%) from $1.5 million for the three month
period ended September 30, 1999 to $2.9 million for the three month period ended
September 30, 2000 and increased $4.0 million (118%) from $3.4 million for the
nine month period ended September 30, 1999 to $7.4 million for the nine month
period ended September 30, 2000.
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FINANCIAL CONDITION
Total assets increased $226.7 million (32%) from $706.8 million as of December
31, 1999, to $933.5 million at September 30, 2000. This growth was the result
of:
1. Cash and due from banks decreased $6.8 million (25%), decreasing from
$26.7 million at December 31, 1999 to $19.9 million at September 30,
2000.
2. Federal funds sold increased $77.0 million from $0 at December 31,
1999 to $77.0 million at September 30, 2000. This increase was due to
short term investments in excess funds generated from deposit
promotions prior to final investment in long term investments.
3. Investment securities increased by $1.8 million (4%), increasing from
$44.2 million at December 31, 1999 to $44.3 million at September 30,
2000. This increase was due to investment in excess funds generated
from deposit promotions.
4. Loans held for sale increased $4.4 million (400%), from $1.1 million
at December 31, 1999 to $5.5 million at September 30, 2000. As a
result of staff turnover in the second half of 1999, reduced
production levels resulted in a lower level of loans outstanding in
the loans held for sale category at December 31, 1999. The new
employees increased the Company's loan production activities in the
first half of 2000 leading to a higher level of loans held for sale
outstanding at September 30, 2000.
5. Net loans receivable increased $147.0 million (19%), increasing from
$615.6 million at December 31, 1999 to $762.6 million at September 30,
2000. This resulted from an increase in loans in the Company's market
areas and the continued growth of the Company's branches.
Total deposits increased $226.7 million (38%) from $602.0 million as of December
31, 1999 to $828.7 million at September 30, 2000. The change was the result of:
1. Demand non-interest bearing deposits increased $20.3 million (35%),
from $58.6 million at December 31, 1999 to $78.9 million at September
30, 2000. This increase was attributable to the continued growth of
the Company's branches, additional new branches, and the addition of a
cash management function.
2. Demand interest bearing deposits increased $7.5 million (38%),
increasing from $20.0 million at December 31, 1999 to $27.5 million at
September 30, 2000. This resulted primarily from the addition of
several seasoned bankers who focus on cash management services, and
servicing high net worth customers.
3. Time deposits increased $199.0 million (38%), increasing from $523.4
million at December 31, 1999 to $722.4 million at September 30, 2000.
The Company utilized promotional campaigns, designed to generate an
increase in certificates of deposit with balances of less than
$100,000, to achieve this growth.
Federal funds purchased and securities sold under agreements to repurchase
decreased $25.1 million (76%) from $32.9 million as of December 31, 1999 to $7.8
million at September 30, 2000.
Note payable increased $12.9 million (111%) from $11.6 million as of December
31, 1999 to $24.5 million at September 30, 2000. In March 2000, the Company drew
$12.4 million on its line of credit to fund capital needs of its Colorado bank.
Allowance for loan losses increased $2.9 million (55%) from $5.3 million as of
December 31, 1999 to $8.2 million at September 30, 2000. The allowance for loan
losses is based on the Company's loan methodology in effect since the first
quarter 1999, which analyzes changes in the size and character of the loan
portfolio, changes in nonperforming and past due loans, historical loan loss
experience, the existing risk of individual loans, concentrations of loans to
specific borrowers or industries and existing and prospective economic
conditions.
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The following table presents, for the periods indicated, an analysis of the
allowance for loan loses and related ratios:
Nine Months Ended
September 30, 2000 September 30, 1999
------------------ ------------------
(dollars in thousands)
Balance beginning of period .......................... $ 5,322 $ 2,187
Provision for loan losses ............................ 3,429 2,174
Net (charge offs) recoveries ......................... (512) 3
------------ ------------
Balance end of period ................................ $ 8,239 $ 4,364
============ ============
Ratios:
Allowance for loan losses to total loans ............. 1.07% 0.85%
Allowance for loan losses to non-performing loans .... 271% 348%
The allowance for loan losses represents management's recognition of the risks
of extending credit and its evaluation of the quality of the loan portfolio. The
allowance for loan losses is maintained at a level that is considered adequate
to provide for anticipated loan losses, based on various factors affecting the
loan portfolio, including a review of problem loans, business conditions,
historical loss experience, evaluation of the underlying collateral and holding
and disposal costs. The allowance is increased by additional charges to
operating income and reduced by loans charged off, net of recoveries.
The following table presents information and ratios of the Company's
non-performing assets as of the dates indicated:
September 30,
-------------------------------
2000 1999
------------ ------------
(dollars in thousands)
Loans 90 days or more delinquent and still accruing interest ... $ 489 $ 550
Non-accrual loans .............................................. 2,550 705
Restructured loans ............................................. -- --
------------ ------------
Total non-performing loans ................................ 3,039 1,255
Real estate acquired by foreclosure ............................ 1,594 91
------------ ------------
Total non-performing assets ............................... $ 4,633 $ 1,346
============ ============
Ratios:
Non-performing assets to total assets .......................... 0.50% 0.22%
Non-performing loans to total loans ............................ 0.39% 0.26%
Non-performing assets for the Company increased $3.3 million (254%) from $1.3
million at September 30, 1999, to $4.6 million at September 30, 2000. The major
component of this increase is one loan which totals $2.4 million (73% of the
$3.3 million increase). This loan is secured by real estate and management
believes the bank is adequately collateralized. As of September 30, 2000, there
were no significant balances of loans excluded from non-performing loans set
forth above, where known information about possible credit problems of borrowers
caused management to have serious doubts as to the ability of such borrowers to
comply with loan repayment terms and which may result in such loans becoming
nonperforming.
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LIQUIDITY
FirsTier continuously forecasts and manages its liquidity in order to satisfy
cash flow requirements of depositors and borrowers and to allow FirsTier to meet
its own cash flow needs. Management has identified two major categories of
liquidity:
1) Ongoing business cash flows:
The Company's major source of cash flows is provided by financing
activities, $216.8 million for the nine-month period ended September
30, 2000 and $237.0 million for the nine-month period ended September
30, 1999. Cash provided by financing activities consisted primarily of
an increase in deposits for the nine-month period ended September 30,
2000. For the nine-month period ended September 30, 1999 the major
components were the issuance of trust preferred securities, deposit
growth and an increase in securities sold under agreement to
repurchase.
The major use of cash flows for the Company is in investing activities,
which amounted to $229.7 million for the nine-month period ended
September 30, 2000 and $230.0 million for the nine-month period ended
September 30, 1999. For the nine-month period ended September 30, 2000,
the major components of this use were a $149.9 million increase in net
loans, a $77.0 million increase in federal funds sold and a net
increase of $1.5 million in investment securities. For the nine-month
period ended September 30, 1999, the major components of this use were
a $205.9 million increase in net loans, and a net increase of $71.2
million in investment securities and a $10.8 million decrease in Fed
Funds Sold.
2) Backup sources of liquidity
Management believes it has developed sufficient backup sources of
liquidity to meet the Company's needs for the foreseeable future. These
internal and external sources include, but are not limited to:
1. The ability to raise deposits through branch promotional
campaigns;
2. Maturity of overnight federal funds sold ($77.0 million available
as of September 30, 2000);
3. Sale of unpledged available-for-sale securities ($5.6 million
available as of September 30, 2000) and
4. Available borrowing lines ($64.5 million available as of
September 30, 2000).
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PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
(i) Exhibits filed with this Form 10-QSB:
Exhibit No. Description
27 Financial Data Schedule.
(ii) Exhibits previously filed and incorporated herein by reference:
Exhibit No. Description
2 Articles of merger merging First Western Corp. into
FIRSTIER CORPORATION(1)
3i Articles of Incorporation of FIRSTIER CORPORATION(1)
3ii Bylaws of FIRSTIER CORPORATION (1)
4.1 Form of Subordinated Indenture dated February 15, 1999
between the Registrant and Wilmington Trust Company, as
Indenture Trustee (2).
4.2 Form of Junior Subordinated Debenture (included as an
exhibit to Exhibit 4.1).
4.5 Form of Amended and Restated Trust Agreement of FW
Capital I (2).
4.7 Form of Preferred Securities Guarantee Agreement (2).
10.1 Revolving Line of Credit dated February 19, 1998,
between FirsTier as borrower and National Bank of
Commerce Trust and Savings Association (2).
10.2 Advance, Pledge and Security Agreement dated October
21, 1997, between Federal Home Loan Bank of Topeka and
Firstate Bank (2).
10.3 Advance, Pledge and Security Agreement dated March 31,
1997, between Federal Home loan Bank of Topeka and
Firstate Bank of Colorado (21).
10.4 Line of Credit agreement signed February 24, 1998
between Firstate Bank of Colorado and Federal Home loan
Bank of Topeka (2).
10.5 Federal Funds Purchased Line agreement between Firstate
Bank and Wells Fargo Bank (2).
10.6 Federal Funds Purchased Line agreement dated August 25,
1998 between Firstate Bank of Colorado and Bankers Bank
of the West (2).
10.7 Federal Funds Purchased Line agreement dated October
20, 1997, between Firstate Bank and Bankers Bank of the
West (2).
10.8 Management Agreement between FirsTier and Western
Management Corporation dated January 21, 1997 (2).
10.9 Management Agreement between Firstate Bank of Colorado
and Western Management Corporation dated January 4,
1993 (2).
10.10 Management Agreement between Firstate Bank of Nebraska
and Western Management Corporation dated January 21,
1998 (2).
10.11 Management Agreement between First Mortgage Bancorp and
Western Management Corporation dated January 21, 1997
(2).
10.12 Electronic Data Processing Agreement between First
Commerce Technologies and Firstate Bank dated May 8,
1998 (2).
10.13 Electronic Data Processing Agreement between First
Commerce Technologies and Firstate Bank of Colorado
dated April 14, 1998 (2).
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10.14 1999 Incentive Plan (2).
10.15 Lease dated July 27, 1999, between JMT, LLC and
FirsTier (2).
10.16 Form of Lockup Agreement.
10.17 Amendment No. 1 to Management Agreement between
FirsTier and Western Management Corporation dated
January 21, 1997.
10.18 Amendment No. 1 to Management Agreement between
Firstate Bank of Colorado and Western Management
Corporation dated January 4, 1993.
10.19 Amendment No. 1 to Management Agreement between
Firstate Bank of Nebraska and Western Management
Corporation dated January 21, 1998.
10.20 Amendment No. 1 to Management Agreement between First
Mortgage Bancorp and Western Management Corporation
dated January 21, 1997.
10.21 1999 FirsTier Corporation Stock Incentive Plan adopted
as of September 15, 1999 (1).
10.22 Agreement concerning the sale of FIRSTIER mark, dated
September 17, 1999, by and between U.S. Bancorp, U.S.
Bank National Association and Firstate Bank of Colorado
(1).
99 Risk Factors incorporated by reference from First
Western's Rule 424(b) Prospectus filed on February 10,
1999 (3).
(1) Filed with the 10-QSB on November 3, 1999
(2) Filed with the Registration Statement on Form SB-2, SEC File No.
333-67107, on November 13, 1998.
(3) Filed with the 10-QSB on August 11, 1999.
(b) Reports on Form 8-K. On September 14, 2000, the Company filed a report on
Form 8-K under Item 5 reporting the execution of a definitive agreement
with Compass Bancshares, Inc. regarding Compass' proposed acquisition of
the Company.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant has
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
FIRSTIER CORPORATION
Date: November 13, 2000 By: /s/ Timothy D. Wiens
--------------------- -----------------------
President
Date: November 13, 2000 By: /s/ Brian L. Svendsen
--------------------- -----------------------
Chief Financial Officer
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INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
27 Financial Data Schedule